Apple's iTunes overtakes Amazon in overall music sales

Strong holiday sales helped Apple's iTunes push past Amazon and take third place in overall music sales during the first quarter, according to a new report.

A spike in iPod sales over Christmas drove new device owners to iTunes, and helped Apple grab 9.8 percent of the overall music market, according to the report, issued Friday by the NPD Group.

Amazon came in fourth with a 6.7 share, according to NPD's figures. Wal-Mart was tops in the quarter with 15.8 percent and runner-up Best Buy snagged 13.8 percent.

Apple managed to capture a larger slice of the market share even though the music industry is mired in a slump. Russ Crupnick, an NPD senior analyst, said that music sales are down 20 percent for the first half of the year.

(Credit: NPD Group)

"This is just another sign of a fundamental shift from physical to digital music," said Crupnick, who also credited Apple with helping to spur the shift. "If they didn't have a superior ecosystem, you wouldn't see so many new digital music buyers."

Crupnick said Apple still must prove that it can grow music sales year-round. He noted that iPod owners buy a little more than 20 songs on average and that number hasn't grown much. Apple also could face competition from Wal-Mart and Amazon.

Wal-Mart has already opened a download store and Amazon is expected to launch one later this year.

"Amazon has outstanding credibility with heavy music buyers," Crupnick said. "It's too soon to tell what's going to happen, but Amazon already has the customer relationships. I'm a big believer in pre-existing customer relationships."

[calpundit]

Half-Right IMO

Wal-Mart has had a digital music service for some time, and
actually undercuts the iTunes price point. But it has flopped ...
largely because its use of Windows Media and its DRM makes it
iPod-incompatible. Moreover, Wal-Mart is -- rightly or wrongly
-- viewed in the public's mind as a brick-and-mortar operation.
People generally don't think of Wal-Mart as an e-tailer.

Amazon's service paints a different picture. In addition to the
brand-loyalty factor mentioned in the story, Amazon benefits
from its plans to sell music DRM-free, and in a format (mp3)
that is iPod-friendly.

While that policy limits its library in the short-run to EMI and
indies, it could easily eat away at iTunes once other labels give
up the ghost on DRM. Amazon is all about ordering online, and
customers will much more easily make the transition.

Just my .02.

[bommai]

Ease of use will win!

Assuming there is no DRM and also assuming that iPod is still king in the DAP market, who do you think has the advantage, iTunes with its integrated store or Amazon. I think iTunes will still beat amazon as long as iPod is king.